For years, the cannabis industry has been mired in a myriad of banking obstacles. Cannabis businesses have struggled to operate because of the inability to secure a bank account. Without proper banking support, legitimate cannabis businesses have no choice but to operate with cash, creating an unsafe and unsustainable environment. However, there is hope with the SAFE Banking Act, a federal bill that will enable financial institutions to work with cannabis-related businesses without fear of federal prosecution. This blog will explore the hardships of current cannabis banking, the astronomical fees, and regulatory compliance issues, and how the SAFE Banking Act can change the game for the cannabis industry.
Navigating the complexities of the cannabis industry is challenging, but accessing financial services is exceptionally difficult. Banks are operating at the federal level and find themselves in a quandary on how to proceed with cannabis businesses. On the other hand, the cannabis industry itself is disarrayed, with multiple businesses competing for limited financial services. With no banking access, the cannabis industry has been forced into the shadows leading to illicit activities, as easily determined by the ever-increasing numbers of cash robberies and low tax revenues. This cycle is present in all cannabis-friendly states, making it more critical for the banking system to offer accessible, secure, and compliant financial services to cannabis businesses.
However, the path to compliance is not an easy one. Right now, banks can provide services to cannabis businesses, but under strict conditions that require vigilance and careful attention to weed out any illicit activity. Most banks steer clear of cannabis businesses, fearing federal prosecution, as cannabis is still classified as an illegal substance federally. The few banks who do offer services, pile astronomical fees to cover their risks, making it almost impossible for cannabis businesses to operate sustainably. This lack of access to banking is the primary reason why most dispensaries exist solely as a cash-only business, leading to increased security concerns and making it difficult for customers to make purchases.
The SAFE Banking Act bill was, therefore, designed to address these challenges by allowing financial institutions to work with cannabis enterprises. Specifically, the bill prohibits federal banking regulators from penalizing financial institutions that offer services to legal cannabis businesses, provided the state also permits such activities. Essentially, it creates a safe harbor for financial institutions, allowing them to engage with the cannabis industry without fear of federal prosecution. The SAFE Banking Act also calls for easier access to financial services to encourage the cannabis industry’s growth and access to capital.
For cannabis businesses, working with banking institutions will be essential to receive affordable loans, credit lines, and checking accounts. With banks’ help, cannabis businesses will be better positioned to receive reasonable capitalization terms, streamlined cannabis credit card processing, and POS financing rates. Additionally, banking compliance regulations will offer greater transparency, and increased security, and boost customer confidence in dispensaries, leading to a surge in revenue streams.
SAFE Banking Act is the way to go for the cannabis industry to finally navigate its banking challenges. The cannabis industry is highly regulated and should have access to financial services that adhere to State and Federal legislation. The SAFE Banking Act provides a safe harbor for financial institutions, allowing them to manage cannabis businesses as they would any other business. The bill is designed to promote transparency, minimize risk, and increase financial stability, ensuring financial services are accessible, streamlined, and transparent. In the end, the SAFE Banking Act will create jobs, generate revenue streams, and promote economic growth, not just for the cannabis industry but for the United States as a whole.